Question

The following materials standards have been established for a particular product: Standard quantity per unit of output 4.4 pounds Standard price $ 13.20 per pound The following data pertain to operations concerning the product for the last month: Actual materials purchased 4,800 pounds Actual cost of materials purchased $ 62,880 Actual materials used in production 4,800 pounds Actual output 700 units The direct materials purchases variance is computed when the materials are purchased. What is the materials price variance for the month

Answer 1

Answer:

Variance          $480  favorable

Explanation:

A material price variance occurs where materials are purchased at a price either lower or higher than the standard price. A favorable variance is recorded where the actual total cost of materials is lower that the standard cost. While an adverse variance implies the opposite.

Standard material cost of 2                                            $

4,800 pounds should have cost (4800 ×$13.20 ) = 63,360

but did cost (actual cost)                                         62,800

Variance                                                                     480  favorable